If you’re going to commit financial fraud, you need to figure out a way not only to deceive your “investors” but also the gatekeepers involved in the process. Your auditor is going to ask questions and not issue financial statements if there is fraud. Your prime broker and custodian are going to ask questions. Hedonova found a way around this.
Lie about them. Say you are using Northern Trust as your custodian. Say you are using Deloitte as your auditor. But don’t actually engage them. At least that’s what the SEC claims in its complaint.
The pitch for investors is interesting. Be a part of group ownership of alternative investments: art, startups, wine, music royalties, real estate, agriculture holdings, litigation finance, etc. A fund full of alternative assets. Hedonova claims to be a “mutual fund.”
This sounds rife with problems to me. Valuations are challenging and sourcing opportunities is hard. Finding and retaining personnel is hard. Each of these alternative classes require their own expertise.
The SEC began poking around and found most of its claims about its gatekeepers were not true and had not been engaged by Hedonova.
The SEC has uncovered millions of dollars sent to Hedonova. It has not been able to identify it purchased much, if any, assets. The firm principals are oversees and, according to the SEC, are not cooperating.
As for the Hedonova website, it’s a buffet of items to stare at under the lens of the Marketing Rule. I might use it for my compliance class in the fall.
Hedonova also has used a bunch of fin-fluencers. I found a bunch of junky stories on blogs and social media platforms spewing out the virtues of Hedonova. (I’m not going to bother linking to them.)
Sources:
- SEC Alleges Fraudulent Securities Offering of Alternative Assets
Securities and Exchange Commission v. Hedonova LLC and Hedonova Advisors LLC, Civil Action No. 2:24-cv-05293 - Complaint against Hedonova
- Hedonova Form ADV Filing